Stop Wasting Your Time With Contract Management

The Mandarin (Yes, The Mandarin) recently posted a great article on why you should stop wasting your time with contract management

As the author clearly states, every department, state and federal, in which I have worked has a set of policies and directives on contracting and contract management. Almost every contract has a contract management plan. Yet we continue to get it badly wrong.

He quotes a recent review of Home Affairs which got a shellacking about their utter inability to reasonably prepare for the end of a contract (as well as other Procurement issues). It’s as he says, when it comes to preparation for contract termination, which should be part of a well formed contract management plan, it’s almost always “too little, too late”.

Contract Management isn’t working, and more importantly, neither are contract management platforms. (Making a colleague of mine who poo-poo’d them almost two decades ago as not worth your time, because they didn’t do any more than what a high schooler could do with some scripting and an access database, a visionary genius.)

So why do we get it so wrong? The author starts off by saying we think about contracts the wrong way, which we do (and there’ll be more on that later), especially since many approach it as a matter of performance and punishment since the contractor or vendor just needs to do what they promised and whatever performance or punishment framework included in the contract will encourage the contractor or vendor to deliver on time.

And, at the end of the day, most organizations just see it as a reporting and control framework, driven by compliance. When, as the author points out, it is supposed to be about outcomes, and, even more importantly, as the author points out, it should be a tool for managing the value chain.

The author then recommends that you fix things by:

  • owning the business outcomes
  • understanding and measuring mutual obligations
  • measuring, reporting, and managing the entire business, not just the odd contract
  • making what’s required visible and clear
  • not treating relationship management and contracting as mutually exclusive
  • using performance measures you understand

Which is all good advice, but not going to fix the fundamental problems. The fundamental problem is that it’s not contract management, it’s project fulfillment (even if you are just buying stuff).

This means that before you can do a contract you have to:

  • first develop a detailed project plan including requirements, desired outcomes, and timelines
  • identify what sub-plan you want to farm out to one (or more) vendor(s, but that requires a lot more planning and possibly subcontracting)
  • create the contract schedule with this plan as well as milestones, reporting requirements, and mutual obligations
  • decide what performance incentives or penalties you want to include to speed up performance and/or prevent late deliveries/completion
  • decide what matters (most) to you and what you are going to require around vendor geography, personnel, sustainability, etc. requirements
  • evaluate the risk and define appropriate mitigation (out) clauses
  • hand it off to legal to complete the Ts & Cs
  • then do a Procurement event
  • then complete it in negotiation, pushing the plan into your project management system once counter-signed

It’s project and relationship management at the end of the day, the rest is just document management, making CMS something that you can do with a high school student and an Access database, since its not where the contract is or how its indexed, but how it’s accessed and used on a daily basis, which should be through the project management system.

And that’s why Project Assurance is so critically important.

Don’t know what that is? Read my original and current series on Project Assurance: